One is good policy. The US more than any other place has combined
a mix of aggressive fiscal and monetary policy, without
interruption since the crisis ended. Other places have embraced
austerity, or pursued inconsistent, start-stop measures, whereas
the US has refused to let off the gas pedal.

The other part is even simpler: They're the physical realities of
coming out of a downturn.

I remember when I wrote a post – I think it was in January of
2009 – you know who David Rosenberg is – he wrote a
commentary back when what he wrote was free... that auto sales
were going to collapse a lot further, and he had some arguments
on it and I went and looked and thought “auto sales also can’t go
too much further, people have to replace their cars.” And so I
wrote this article that says look, auto sales are near the bottom
– we were at a 9 million annual rate then- I said there’s just no
way – we have to be selling 12, 13,14 million because people need
new cars every 5-7,8 years.

The economy recovered because life goes on. Cars break down,
people have to buy new ones, someone has to build them, and
things just get going again.

It's been the same with housing. Here's Bill McBride again...

That’s the same kind of logic that I used on the housing. You
just kind of look at it and go, after a while, there’s all this
excess supply that was built, then people pulled back and lived
with their parents – but people don’t want to live with their
parents very long. That supply gets absorbed. When I go out into
The Inland Empire I can tell you...If it’s not mostly growing,
it’s getting there. Where I live, as soon as foreclosures come on
the market there’s people lined up.

Populations grow, and people don't want to live with their
parents forever, and they start homes, and the excess housing
inventory gets absorbed.

That's why despite the fact that a few years ago, people were
talking about razing all the excess homes, today we have a
housing starts chart that's going straight vertical.

At the trajectory this is going on,
there are some estimates that residential construction and
related industries could start adding a whole percentage point
per quarter to GDP.

The task of economic recovery isn't over by a long stretch. There
are will way too many people unemployed and underwater on their
homes and so forth, which is why the upcoming Fiscal Cliff
negotiations are so crucial. It would not be hard to backslide.

But so far we're thankful that compared to how things could be,
things are pretty good.